Fall Semester 2025 – ECS1501: Economics IA |
University of South Africa (UNISA) | Verified
Exam and Application Questions with Correct
Answers & Detailed Explanations | Complete
Study and Revision Guide for Economics
Students (2025–2026 Edition)
Question 1:
What is the definition of economics?
A) The study of how societies allocate scarce resources.
B) The study of financial markets.
C) The analysis of consumer behavior.
D) The examination of government policies.
Rationale: Economics focuses on resource allocation and decision-making.
Question 2:
What is the basic economic problem?
A) Scarcity of resources versus unlimited wants.
B) Unemployment rates.
C) Inflation levels.
D) Trade deficits.
Rationale: Scarcity drives economic choices and prioritization.
Question 3:
What are the factors of production?
A) Land, labor, capital, and entrepreneurship.
B) Supply, demand, price, and profit.
C) Goods, services, needs, and wants.
D) Investment, consumption, savings, and expenditure.
Rationale: These factors are essential for production processes.
Question 4:
What does the law of demand state?
A) As the price of a good decreases, the quantity demanded increases.
B) Demand is always constant.
C) Higher prices lead to higher demand.
D) Demand is not affected by price changes.
,Rationale: The law of demand reflects consumer behavior.
Question 5:
What is a market economy?
A) An economic system where decisions are made by supply and demand.
B) An economy controlled by the government.
C) A barter system.
D) An economy based on subsistence farming.
Rationale: Market economies rely on individual choices and market forces.
Question 6:
What is gross domestic product (GDP)?
A) The total value of all goods and services produced within a country in a specific
period.
B) The total income of all citizens.
C) The total value of exports minus imports.
D) A measure of inflation.
Rationale: GDP is a primary indicator of economic performance.
Question 7:
What does "inflation" refer to?
A) The general increase in prices and fall in the purchasing value of money.
B) A decrease in consumer spending.
C) A rise in unemployment.
D) An increase in production costs.
Rationale: Inflation affects the economy by altering purchasing power.
Question 8:
What is the purpose of fiscal policy?
A) To manage the economy through government spending and taxation.
B) To control interest rates.
C) To regulate currency exchange.
D) To oversee banking institutions.
Rationale: Fiscal policy influences economic activity and growth.
, Question 9:
What is the role of the Central Bank?
A) To regulate the money supply and maintain financial stability.
B) To control fiscal policy.
C) To manage trade agreements.
D) To oversee public services.
Rationale: Central Banks are pivotal in monetary policy and stability.
Question 10:
What does "opportunity cost" refer to?
A) The value of the next best alternative forgone when making a decision.
B) The total cost of production.
C) The cost of a good or service.
D) A fixed expense incurred in business operations.
Rationale: Opportunity cost is crucial for decision-making in economics.
Question 11:
What is a "monopoly"?
A) A market structure where a single seller dominates the market.
B) A competitive market with many sellers.
C) A type of government regulation.
D) A market with limited competition.
Rationale: Monopolies can lead to market inefficiencies.
Question 12:
What does the term "elasticity" refer to in economics?
A) The responsiveness of demand or supply to changes in price.
B) The total supply of goods in the market.
C) A fixed cost in production.
D) A measure of economic growth.
Rationale: Elasticity helps analyze consumer behavior and market dynamics.
Question 13:
What is a "public good"?
University of South Africa (UNISA) | Verified
Exam and Application Questions with Correct
Answers & Detailed Explanations | Complete
Study and Revision Guide for Economics
Students (2025–2026 Edition)
Question 1:
What is the definition of economics?
A) The study of how societies allocate scarce resources.
B) The study of financial markets.
C) The analysis of consumer behavior.
D) The examination of government policies.
Rationale: Economics focuses on resource allocation and decision-making.
Question 2:
What is the basic economic problem?
A) Scarcity of resources versus unlimited wants.
B) Unemployment rates.
C) Inflation levels.
D) Trade deficits.
Rationale: Scarcity drives economic choices and prioritization.
Question 3:
What are the factors of production?
A) Land, labor, capital, and entrepreneurship.
B) Supply, demand, price, and profit.
C) Goods, services, needs, and wants.
D) Investment, consumption, savings, and expenditure.
Rationale: These factors are essential for production processes.
Question 4:
What does the law of demand state?
A) As the price of a good decreases, the quantity demanded increases.
B) Demand is always constant.
C) Higher prices lead to higher demand.
D) Demand is not affected by price changes.
,Rationale: The law of demand reflects consumer behavior.
Question 5:
What is a market economy?
A) An economic system where decisions are made by supply and demand.
B) An economy controlled by the government.
C) A barter system.
D) An economy based on subsistence farming.
Rationale: Market economies rely on individual choices and market forces.
Question 6:
What is gross domestic product (GDP)?
A) The total value of all goods and services produced within a country in a specific
period.
B) The total income of all citizens.
C) The total value of exports minus imports.
D) A measure of inflation.
Rationale: GDP is a primary indicator of economic performance.
Question 7:
What does "inflation" refer to?
A) The general increase in prices and fall in the purchasing value of money.
B) A decrease in consumer spending.
C) A rise in unemployment.
D) An increase in production costs.
Rationale: Inflation affects the economy by altering purchasing power.
Question 8:
What is the purpose of fiscal policy?
A) To manage the economy through government spending and taxation.
B) To control interest rates.
C) To regulate currency exchange.
D) To oversee banking institutions.
Rationale: Fiscal policy influences economic activity and growth.
, Question 9:
What is the role of the Central Bank?
A) To regulate the money supply and maintain financial stability.
B) To control fiscal policy.
C) To manage trade agreements.
D) To oversee public services.
Rationale: Central Banks are pivotal in monetary policy and stability.
Question 10:
What does "opportunity cost" refer to?
A) The value of the next best alternative forgone when making a decision.
B) The total cost of production.
C) The cost of a good or service.
D) A fixed expense incurred in business operations.
Rationale: Opportunity cost is crucial for decision-making in economics.
Question 11:
What is a "monopoly"?
A) A market structure where a single seller dominates the market.
B) A competitive market with many sellers.
C) A type of government regulation.
D) A market with limited competition.
Rationale: Monopolies can lead to market inefficiencies.
Question 12:
What does the term "elasticity" refer to in economics?
A) The responsiveness of demand or supply to changes in price.
B) The total supply of goods in the market.
C) A fixed cost in production.
D) A measure of economic growth.
Rationale: Elasticity helps analyze consumer behavior and market dynamics.
Question 13:
What is a "public good"?
